Article originally posted on August 31, 2013 to the Appalachian News-Express Web site http://news-expressky.com/
BY RUSS CASSADY
The first concrete steps toward establishing a commercial air service out of the Pikeville-Pike County Airport were taken Friday, with two bodies approving agreements with a company which wishes to have a daily service out of, and back into, Pikeville.
During a special joint meeting on Friday of the Pikeville City Commission and Pikeville-Pike County Airport Board, the agreements and funding sources were approved to get the project off the ground.
According to documentation obtained by the News-Express, the two companies involved in the project, Corporate Flight Management (CFM) of Smyrna, Tenn., the service provider, and Public Charters, Inc., of Avoca, Penn., the ticketing and ground service company, plan to have the service operating by March.
The agreements approved on Friday outline airport services that the airport will provide to the airline and the fees the airport board will charge for the services, as well as how the City of Pikeville will manage its revenue guarantee fund to support the service.
How the service will operate
The service, according to a statement from the organizations working on the project, will feature nonstop turboprop flights operated by CFM to travel from Pikeville to the Nashville International Airport. Because of the involvement of Public Charters Inc., the statement said, sales platforms for tickets for the new flights will be available on virtually every Internet travel site, such as Expedia, Kayak, Travelocity and others.
From Nashville, passengers can reach the world, officials said.
“The new flights to Nashville will be time to allow Pikeville travelers to connect to nonstop connecting flights to 49 destinations throughout the U.S., Canada and Mexico,” said Luke B. Schmidt, the consultant for the City, Chamber and airport on the project. “Travelers will be able to connect to any of the nine airlines which serve (Nashville), including low-cost carrier Southwest Airlines, which has a major presence in Nashville.
“Fully 23 of the 25 business destinations for Pikeville travelers will be only one stop away by connecting in Nashville,” Schmidt continued. “This new service will eliminate the need to drive to Lexington, Charleston and Huntington/Ashland when it comes time to travel.”
Those flights, unlike a charter service, will operate seven days a week, with one flight departing Pikeville and traveling to Nashville, and another flight returning from Nashville later that day. The flights, officials said, will run seven days a week, and, because of the regulations under which the service will operate, flights can only be cancelled because of extreme circumstances, such as weather or a nationwide or regional grounding of flights.
The service, officials said, differs greatly from a proposal made a few years ago by a company called Locair.
According to documents provided to the News-Express, the current proposal differs from what Locair offered in “every” way, including:
• The airports and flight schedule are approved by the U.S. Department of Transportation (DOT) Special Authorities Division; no changes can be made to either without DOT approval.
• The service will be daily, including weekends.
• All passenger seats on the aircraft are available for sale on each flight.
• There will be combined itineraries with many carriers, including Southwest.
• There will be connecting service at the hub airport’s main terminal — in Transportation Safety Authority “sterile” conditions to hundreds of destinations.
The sterile conditions will mean TSA screeners and inspectors, who will be employed and paid by the TSA, and stationed in Pikeville. Because of the “sterile” treatment, Schmidt said, the planes from Pikeville to Nashville will actually pull up to a terminal, eliminating the need for a second security check to get on another flight.
Funding source has changed
When the project was in its early stages, it was subjected to a high level of controversy, when it became clear to organizers that they would have to have the support of the Pike Fiscal Court to apply for a $1 million multicounty coal severance grant.
After weeks of controversy, the fiscal court approved by a 5-2 vote applying for the funding for the project, which was later received.
However, this week, documents show, the full $1 million in funding was not obtained through coal severance.
According to a letter obtained by the News-Express, earlier this week, Pikeville City Manager Donovan Blackburn was notified by the Kentucky Department for Local Government that the agency would be funding a grant for $200,000 for the air service project from coal severance.
The reduction in coal severance, Schmidt said, is a direct result of the reduction in mining in the region, which has caused severance tax receipts to fall.
In the same letter, the agency confirms that it is the intent of the Kentucky Transportation Cabinet to fund the rest of the project, contributing a total of $470,588 to ensuring the operation of the service.
The funding, according to documentation provided to the News-Express, will be used to fund a monthly revenue guarantee program, which officials said will only be paid to the carrier if the company’s actual revenue trails the agreed upon monthly revenue target, and in an amount equal to the shortfall.
The service, according to the documents, is projected to carry a total of 5,244 passengers in the first year, with that number climbing to 13,223 the following year.
“The service should start with an average of three revenue passengers per flight in month No. 1 and build to an average of 18.5 revenue passengers per flight in month No. 14,” the documents said.
According to documents, the total amount of revenue guarantee which is planned to be available to the company is $1.425 million, between March of next year through February of 2016, the end of the agreement, with city officials planning to ask the state legislature to fund an additional $104,412 to bring the total available to that amount.
Approximately $750,000 is coming from the U.S. DOT’s Small Community Air Service Development Grant Program, from a grant first approved in 2011.
Not all convinced of the good of the project
While the Pikeville City Commission unanimously approved the agreements during the meeting on Friday, the Pikeville-Pike County Airport Board approved the agreements by a 5-1 vote, with member Brent Wagner voting against the measure.
During the meeting, Wagner questioned Schmidt on several points of the airport’s end of the contract, including what the airport’s rights and responsibilities are.
Wagner told Schmidt that he was disappointed the board had only received the agreement 16 hours before the meeting.
“It’s hard to prepare and have valid questions when you don’t have the documents in front of you,” Wagner said.
However, Wagner pointed out that one part of the agreement commits the airport board to spending a maximum of $210,000 to bring the service to Pikeville. In response to Wagner’s questioning, Schmidt said that no matter what, the amount the airport would have to contribute cannot exceed that amount.
Also, Wagner pointed out that the contract is written in such a way that it would prevent the airport board from backing out without the city’s permission and that it would lock the airport board in to only being able to add a “mark up” of 50 cents per gallon on the fuel sold to the airline.
Schmidt said the fuel cost being locked is simply an incentive to attract the company, which wants to purchase fuel from the Pikeville Airport to contribute back to the community. The plane, Schmidt said, could fly from Nashville and back without having to fuel up in Pikeville.
“In reading this, I get the impression that there’s a lot of things in line for this company … to make it work,” Wagner said. “But we’re being restricted in many ways. We’re restricted on our profitability. We’re restricted about not being able to take this agreement and speak to the public, the people that’s spending the money for it.”
Project first-of-a kind
According to Schmidt, the project to bring air service to Pikeville, as far as he is aware, is the first of its kind, in that the airline expects its involvement with the Pikeville-Pike County Airport to be profitable and it could become a model project for the nation.
But, he said, it doesn’t come without risk.
“All this requires a bit of a leap of faith,” Schmidt said.
Pikeville Mayor Pro-Tem Jimmy Carter agreed there is some risk before casting his vote, but said that the possible reward makes the risk worth it.
“We have to take the calculated risk to make sure that we succeed here in Eastern Kentucky,” Carter said. “If we don’t, we’re dead in the water.”
A formal community announcement of the project is currently scheduled for Oct. 17 at the airport. Schedules and ticket prices will be announced at a later date.